Contingency Contract vs Direct Contract in Roofing

The contract type you use on an insurance claim controls what happens if the claim is denied, what the homeowner owes you for inspection, and whether the contract is enforceable at all. Getting it wrong in California, Texas, or Florida can void the contract and expose you to criminal liability in some cases.

The Two Contract Types

Contingency Contract (CTA)

A contingency to accept (CTA) or conditional contract binds the homeowner to use you as the contractor if and only if the insurance claim is approved.

Key features:

• No obligation to pay if claim is denied
• Contractor performs inspection and claim filing assistance as part of the deal
• Amount is determined by the carrier's scope of loss (plus any supplements)
• Homeowner typically owes only the deductible and any upgrades out of pocket

Direct Contract (Retail)

A direct contract is a standard retail agreement. The homeowner pays a set price whether or not insurance is involved.

Key features:

• Fixed price negotiated with homeowner
• Homeowner pays the full amount regardless of insurance outcome
• Commonly used for retail reroofs, preventive replacements, and cash jobs

When to Use Each

ScenarioContract Type Hail or wind damage claim, insurance pendingContingency Retail cash reroof, no insurance involvementDirect Homeowner wants to finance regardless of claimDirect Claim is already approved in writing before contractDirect at the approved amount Preventive replacement for age or wearDirect Partial claim with substantial retail add-onsHybrid, see below

State Restrictions

California

California Business and Professions Code 7159.5 and related statutes govern home improvement contracts. For insurance claim work:

• Contingency contracts are permitted but must include specific disclosures
• The contract must include a 3-day right of cancellation
• Deductible waiving is explicitly prohibited (criminal misdemeanor)
• Contractor license must be listed on the contract
• Home solicitation sales require specific additional disclosures for door-to-door deals

Texas

Texas Insurance Code 1215.051 (roofing contractor registry requirements) and the Texas Deceptive Trade Practices Act apply:

• Contingency contracts are common and legal
• Deductible waiving is a criminal offense under 1215
• Roofing contractors must be registered with TDLR
• Home solicitation sales have mandatory 3-day cooling-off
• "Public insurance adjuster" work by roofers is tightly regulated; roofers may not adjust claims

Florida

Florida has aggressive roofing regulation under Statute 489 and recent storm-related amendments:

• Contingency contracts must include "AOB" (Assignment of Benefits) or non-AOB choice
• As of 2023-2024 reforms, AOBs are restricted for roofing work
• Deductible waiving is prohibited and actively investigated
• Unlicensed contracting is a felony above $2,500 in work
• Fraud statutes (817.234) make misrepresentation on claims a 3rd degree felony

Other States

Most states permit contingency contracts. Disclosure requirements vary. A few states (Colorado, Minnesota, New Jersey) have enacted roofing contractor registration or licensing rules that restrict certain practices. Consult a local attorney before drafting a template.

Required Clauses in a Contingency Contract

1. Clear statement of contingency: "This contract is contingent on the approval of the homeowner's insurance claim."
2. What the homeowner owes: deductible and any agreed upgrades
3. What happens on denial: no obligation to proceed
4. Right of cancellation (3 days typical, check state)
5. Contractor license number and state registration
6. Scope of work (to be determined by carrier scope of loss and any supplements)
7. Signature block with date

Required Clauses in a Direct Contract

1. Fixed total price
2. Payment schedule (deposit, progress, completion)
3. Scope of work with materials specified
4. Change order process
5. Start and completion dates (or range)
6. Warranty terms
7. Right of cancellation
8. Contractor license and state registration
9. Signature block with date

Hybrid Contracts

Some jobs mix insurance scope and retail upgrades (example: carrier approves re-roof, homeowner adds skylights out of pocket). Handle these as two documents:

1. Contingency contract covering the insurance scope
2. Direct contract for the out-of-pocket upgrades

Do not combine into one document with unclear pricing. That ambiguity becomes a dispute engine later.

What Voids the Contract

• Missing required disclosures (especially right of cancellation)
• Deductible waiving explicitly written or implied
• Unlicensed or unregistered contractor
• Door-to-door sale without solicitation disclosures
• Material misrepresentation about damage or coverage

A voided contract usually means you cannot enforce payment. In some states, it also means criminal exposure.

Common Disputes

• Denial and abandonment: claim denied, homeowner walks. Contingency contract means you are out your inspection time and not owed anything. Build that into margin expectations.
• Partial approval: claim approved for less than you quoted. Your contingency adjusts to the carrier scope. You do not get to collect the gap.
• Supplement denial: you filed a supplement, carrier denied. Homeowner may still be on the hook for the base scope if they signed a direct contract with an amount. Under contingency, they are not.

RoofKnockers stores contract templates by type (contingency vs direct) and auto-flags required clauses for your state. See the contract management feature.

Related: when insurance denies your claim, adjuster scope dispute playbook, and depreciation collection playbook.

See pricing or start a trial.

FAQ

Can I switch from contingency to direct mid-claim?

Yes, with a signed amendment. Usually happens when the claim is approved and you want to lock in retail upgrades. Keep both documents in the job file.

Is a verbal contingency agreement enforceable?

In most states, no. Home improvement contracts over a certain dollar amount (varies $500-$2,000) must be in writing. Verbal agreements collapse in court.

What if the homeowner signs contingency and then a direct contract with a competitor?

Depends on the state and the contract language. A well-drafted contingency contract grants exclusivity during a reasonable period. Consult a local attorney before suing; most of these resolve with a firm letter.